Analysis of Politics, Philosophy and Economics from a Marxist Perspective

Thursday, 18 August 2016

Capital III, Chapter 45 - Part 3

Differential rent as much as absolute ground-rent depends upon the existence of this monopoly of landed property, and all instances where rent disappears altogether require the absence or dissolution of landed property. But, such instances are exceptional and temporary.

The cases cited by Marx are where the capitalist and landlord are one and the same; where within a total area of leased land, some parts are effectively rent free, considering the rent paid for the total area; if an additional investment of capital on the same land only returns the average profit.

Where the capitalist is also the landlord, he can treat the land as simply an element of nature, without concern over whether its higher fertility will cause him to pay Differential Rent I, or whether an additional investment of capital, on his part, will cause him to incur Differential Rent II. However, if he has bought the land, the price he paid for it, will have reflected any superior natural fertility, and any increase in value resulting from the investment of capital now incorporated in the land.

Moreover, the land will, on the same basis, have a current value, and as such represents capital value tied up in it, as fixed capital, which the capitalist should take into consideration in calculating their annual rate of profit. Marx does not seem to have taken this into account.

At the time he was writing, the instances of capitalists' and landlords' interests being one and the same were exceptional.

“Just as capitalist cultivation of the soil presupposes the separation of functioning capital from landed property, so does it as a rule exclude self-management of landed property.” (p 751)

It is still the case that this separation exists, but with the development of capital in agriculture, most large scale farms operate as agribusinesses on an industrial scale, and these large scale capitals frequently do own the land they operate.

Marx seems to miss the real point here. His argument is that the rent disappears if the capitalist and the landlord are one and the same. But, he says, this is only possible so long as demand does not require additional land to be cultivated, which must be rented from a landlord.

But, the real situation is that the rent exists whether the landlord and the capitalist are one and the same or not. As with interest on money-capital, it exists whether the money-capital is provided by the productive-capitalist, or borrowed from a money-capitalist. The only question is in whose pocket it ends up. If money-capital is borrowed from a money-capitalist, the interest goes to the money lender. If its provided by the productive-capitalist, he keeps it. That has to be the case, because as Marx showed previously, this interest payment does not add anything to the value of the commodity. Similarly, if land is loaned out, by a landlord, the rent goes to them, whereas if the land is owned by a productive-capitalist they retain the rent themselves.

The productive-capitalist considers the interest on the money-capital they provide to the business, in the same way that the money-capitalist does, i.e. its alternative use. The productive-capitalist sees the money-capital in the context that it could have been loaned out, and so the interest they have lost from doing so, is a “cost” of using it for productive purposes. In other words, if I could have earned 5% interest on the money-capital, but investing it productively only returns 4%, I will view it as having lost 1% rather than gaining 4%. That indeed, is why many large corporations have used their money hoards to buy shares, for speculative purposes, rather than to purchase additional productive-capital.

For the capitalist farmer, who owns their land, this land has a price, a capital value. It could similarly have been used for other purposes. The farmer could have sold the land, realised this capital value and used the proceeds to buy government bonds, providing a guaranteed income, for example, or the proceeds could have been used to buy shares, or to buy productive-capital in some other industry, so as to make profits. The capitalist farmer will then seek to make some return on this significant tie-up of capital value in the land, as much as would any other landowner.

The reason that rent does not disappear, is not because, as Marx argues here, the identity of landlords and capitalists is exceptional, but because, under capitalism, land, like money-capital, is a commodity. It has a price, and consequently forms capital-value for its owner. The owner, therefore, seeks a return on that capital value, whether it is used by themselves or loaned out to others.

Both rent and interest are deductions from surplus value. As Marx pointed out previously, if there were no money-capitalists, and all money-capital was provided by each productive-capitalist themselves, the category of interest would thereby disappear. Similarly, if all farmers owned the land they farmed, and land was not bought and sold as a commodity, then the category of rent would disappear.

But, it is precisely because both money-capital and land exist as commodities, which are bought and sold, which means that they have a market price – interest and rent.

About Me

Left school at 16. Became an ASTMS shop steward at 19, and a lifelong trade union activist. Delegate to North Staffs Trades Council 1974-87. Secretary North Staffs Miners Support Committee 1984-5. President North Staffs Trades Council 1985-6 and 1986-7. Delegate to Staffordshire Association of Trades Councils 1985-7. Delegate West Midlands Regional Council of the TUC 1985-7. Secretary Newcastle UNISON 2000-2.
Member of the International Communist League/Workers Socialist League 1974-87.
Went to University as mature student at age of 24. Obtained Joint Honours Degree in Economics and Politics with Philosophy and Statistics, followed by a Post Graduate Certificate in Education.
Labour Party member since 1974. Stoke City Councillor 1983-4, expelled from Labour group 1983, and resigned from Council in 1984 because of refusing to vote for rent and rate rises, and budget cuts. Staffordshire County Councillor 1997-2005.
Assistant Secretary Stoke District Labour Party 1981, and held pretty much every position from Executive member, to Branch Secretary, and Branch Chair.